Latest evacuations plunge oil sands restarts into uncertainty

By Nia Williams
CALGARY, Alberta, May 18 (Reuters) - The sudden surge north
of the massive wildfire burning in Canada's oil sands region has
dealt a new setback to producers, triggering a second round of
evacuations and threatening work camps north of Fort McMurray.
With the the city of Fort McMurray off limits and fewer
places to house workers needed to restart operations, production
may be shut down for longer than companies and market analysts
had anticipated.
A shift in winds and hot temperatures sent the blaze roaring
toward Suncor Energy SU.TO and Syncrude Canada's mining and
upgrading projects late Monday, forcing them to shut down for
the second time in two weeks.
It also prompted the hasty evacuation of 8,000 oil sands
workers from a dozen nearby camps, engulfed one 665-room lodge
in flames and threatened other camps, emergency officials said.
Scores of work camps scattered across the remote region
house thousands of people who fly in from around the country.
"We have got our fingers crossed because without the camps
there's nowhere for any workers to go," said Ian Robb, president
of the Unite Here Local 47 union, which represents camp cooks
and cleaners.
"If the camps are not standing, there's no rebuilding."
Suncor's base plant and Syncrude alone account for about
665,000 barrels per day of oil sands crude production, and both
were in the process of bringing back workers and restarting
operations after the first round of shutdowns.
Analysts said a return to normal operations likely would
take at least two weeks after it is deemed safe for staff to
return to sites. And all that depends on the still
out-of-control fire.
"We were hearing like everyone else that companies were
getting staff back on location and warming things up, and now
it's evacuation again. We don't know how long this will last,"
said Rob Bedin, engineering analyst at RS Energy Group in
Calgary.
A dozen oil sands producers shuttered output as a precaution
two weeks ago as the fire forced Fort McMurray's 90,000
residents to flee and destroyed nearly 15 percent of the city's
structures.
The loss of 1 million barrels per day output from the oil
sands, the world's third largest crude reserves, accounts for
roughly a quarter of Canada's total production.
"We're probably talking until the start of June to look at
some bigger scale restarts at these projects," said FirstEnergy (NYSE:FE)
Capital analyst Martin King. "It's basically a month of
outages."
Spokeswoman Sneh Seetal said it was too soon to say when
Suncor would be able to return to normal.
Last week, oil industry executives confidently predicted
some facilities would restart operations "within days." But, so
far, only Shell Canada's RDSa.L Albian Sands project RDSa.L
and Statoil ASA's STL.OL Leismer facility have managed to
return, at reduced rates.
Several firms had plans to begin air commutes for workers,
relying on the fly-in-fly-out (FIFO) system common in the area
to get workers to remote sites.
At that time, the main fire risk was seen to the south of
Fort McMurray, which has smaller thermal projects. The
wildfire's rapid charge north toward the largest projects in the
region has changed the picture.
Air quality concerns also are holding up repair efforts. The
Alberta government said on Wednesday it plans to start phased
re-entry to Fort McMurray on June 1, as long as safety
conditions are met.
Ongoing disruption to critical energy infrastructure also is
likely to slow the return to normal.
The 355,000 hectare blaze got within 1 kilometre of Enbridge
Inc's ENB.TO Cheecham terminal on Monday and prompted Inter
Pipeline IPL.TO to partially shut down a key diluent pipeline
to the oil sands on Tuesday, the second time since the fire
began on May 1. The pipeline returned to full operations, again,
on Wednesday.